Keep Your Distance!

For automotive dealers, the investment required to establish a new dealership can be significant, covering everything from tools and machinery to vehicle inventory and due diligence, along with other associated start-up costs. Meanwhile, manufacturers face ongoing challenges of staying competitive in a rapidly evolving automotive market. A key strategy for manufacturers to remain relevant is ensuring a sufficient number of dealerships exist to meet customer demands and expectations. However, this strategy can sometimes lead to conflicts known as "encroachment".

Understanding Encroachment

Encroachment occurs when a new dealership is opened or an existing one is relocated closer to another dealership in the same network. Such moves often lead to disputes between existing dealers and manufacturers. To mitigate these conflicts, manufacturers typically include provisions in their dealership agreements that reserve the right to establish new locations or relocate